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Keep close watch on credit score

Tue., May 4, 2010

What’s your credit score and, more importantly, why does it matter? More than ever, credit scores are a big deal.

Lenders use your score to understand what type of risk they are taking by lending you money. The higher your score, the lower the interest rate you will pay; the lower your score, the higher rates you pay for new debt. Your credit score also can be used by potential employers during the application process.

Your credit report helps to make up your FICO score, issued by Fair Isaac Corporation. Scores range from 300 to 850. A credit score of 710 or better is needed to get the most desirable loan rates.

Your score is based on your payment history, the amount of credit owed, the length of time credit has been established, and whether new loans are of a desirable mix.

There are three major credit agencies: Equifax, Experian and Transunion. Each gives you a FICO score based on the information the bureaus keep about you. Each year, you are entitled to a free credit report from each of them.

One easy way to take advantage of your free report is to go to It is worth the effort to make sure there is no wrong information on your report that could lower your score. Many services claim to provide a free credit report, but then ask for a credit card. You do not need to pay anything to get your free report. However, if you want your FICO score, that will cost a fee. You can go to for your score; it will cost about $16.

How long will negative information stay on your credit report? The answer depends on what type of information. Bankruptcies last seven years for Chapter 13, 10 years for Chapter 7. Foreclosures stay around seven years, as do late payments and, depending on the type and age of the debt, collections. Public records generally last seven years as well. Unpaid tax liens can remain on your report indefinitely. A general rule of thumb is older items have less of an impact on your score.

Knowing your score will allow you to do something about it and help your financial future. Your credit score is important, so make sure it’s accurate.

Sarah Rieger is a certified financial planner and member of the local Financial Planning Association chapter. Readers are invited to submit questions on financial planning to be answered in this space each Tuesday. Send questions to

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